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The Labour Party should make a “radical break” with the current higher education system, lowering costs to the taxpayer with measures including the scrapping of student maintenance grants and asking universities to “change their insular attitudes” on student credit transfers.

John Denham, the former Labour universities secretary, was scheduled to set out these arguments in a speech at the Royal Society of Arts in London on 16 January. He wants to offer a vision of how the party could bring down fees to about £4,000 a year for mainstream three-year degrees while reintroducing additional public funding to keep universities’ overall teaching income at the same level as today.

Labour could offer “lower fees, lower debt, lower [loan] payments, as many graduates and new money for research and teaching”, he says in a draft of the speech, which calls for a “radical break with both the current system and that left by Labour”.

He told Times Higher Education ahead of the speech: “I very much hope these ideas will be taken forward into [Labour’s] policy review.” That review, aimed at producing ideas for the general election manifesto, is being led by Jon Cruddas. Mr Denham added that he has kept Liam Byrne, Labour’s shadow universities, science and skills minister, “well briefed about my thinking”.

However, the plan may be problematic for some in the Labour Party as it would involve shifting billions of pounds from loans into direct public funding, at a time when a Labour government would be under pressure on public spending.

Mr Denham argues in his speech that a future policy should “put as much money as possible into teaching”, rather than spending on loan write-offs for students; encourage greater provision of two-year degrees; foster the creation of 50,000 employer-funded “no fee” courses a year; and scrap maintenance grants in favour of loans.

The Southampton Itchen MP, who is leaving Parliament at the next election, admits that scrapping maintenance grants has been seen as “politically untouchable”.

But calling for living costs to be lowered by having more students study at home, Mr Denham says that Russell Group and Million+ members, for example, should “actually cooperate and collaborate on the delivery of courses”. He continues: “Real flexibility of study would enable students to study mutually recognised credits at universities within their locality.”

Mr Denham says that, based on government figures, in 2015-16 there will be £6.7 billion of “tax-funded spending” on higher education, with £4.2 billion spent on writing off the portion of loans that will never be repaid by students – the resource accounting and budgeting charge.

The former minister says his plans, including replacing a large portion of loans with direct public funding and thus lowering RAB charges, could produce a £4.7 billion a year allocation of direct funding for teaching. This would amount to a “flat-rate student entitlement which goes to their university” of £14,800, for the duration of their studies.

In addition, “The total fee cost of the average three-year degree would be less than £10,000 – about the level fees were at when Labour left office”, while a “full cost university” three-year course – say, at a research-intensive institution – would fall from the current £,000 “to about £12,000”. The total fee cost for a two-year degree “would be less than £5,000”.